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Retail sales in Singapore to return to pre-Covid levels: RHB

Bryan Wu
Bryan Wu • 3 min read
Retail sales in Singapore to return to pre-Covid levels: RHB
Decreasing online sales momentum suggests that the shift towards brick-and-mortar shops is already in motion, according to RHB economist Barnabas Gan.
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RHB senior economist Barnabas Gan believes that Singapore’s retail sales will return to pre-Covid levels by the end of 2022, with a forecast of 10% growth in 2022 from the 11.1% expansion in 2021.

Already, Singapore is showing signs of improvement. Singapore’s retail sales expanded by 17.8% y-o-y in May 2022, marking a third consecutive month of increase. Excluding motor vehicles, retail sales surged 22.6% y-o-y, as motor sales dipped 13.4% y-o-y. This growth was primarily led by higher spending in departmental stores and in selected discretionary goods such as wearing apparel & footwear, watches & jewellery, as well as recreational goods.

“Key drivers for retail sales in Singapore include the tight labour market seen ytd, whilst the gradual reopening of Asia’s borders should support tourism-led spending,” the economist writes.

As of April 2022, Singapore’s unemployment rate is at 2.2% compared to October 2020’s high of 3.6%. Inbound tourism has also increased significantly to 418,000 visitors in May 2022, from 57,000 at the start of 2022.

“On the back of domestic demand and tourism-led spending, we think retail sales from an index perspective will likely return to pre-Covid levels by the end of this year,” says Gan.

Retail sales momentum has accelerated to 3.5% m-o-m seasonally adjusted on a three month moving average (3MMA) basis in May 2022, the fastest since the 8.7% increase in September 2020.

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“This is likely led by pent-up domestic demand and tourism-led spending. Momentum is likely to stay buoyed in 3QFY2022 before dissipating in 4QFY2022,” the economist says.

“We think that should the growth momentum in tourist arrivals sustain into the end-year, monthly inbound tourism in December may touch 1.5 million persons. This is against a monthly average of 1.6 million inbound tourists in 2019,” he adds.

Support for retail sales in Singapore may also stem from online demand, with online sales expected to remain sizeable in the year ahead, although consumer behaviour shifts towards brick-and-mortar shops could see softer demand for online shopping in 2H2022, writes the economist.

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Online sales as a percentage of total retail sales declined to 12% in May 2022 — the lowest since April 2021 — with online sales momentum decreasing by 3.5% in April 2022 and 3.7% in May 2022 on a 3MMA basis, suggesting that the shift in consumer behaviour away from online buying is already in motion, according to Gan. Online sales across essential products have moderated in May, namely in computer & telecommunication, furniture & household equipment and supermarkets.

For overall retail sales — both on and offline — Gan expects to see some front loading effects this year in response to the expected Goods & Services Tax (GST) hike effective Jan 1, 2023.

Caveats to RHB’s optimistic outlook for retail sales in Singapore could arrive from any unexpected worsening of the Russia-Ukraine conflict and China’s economic slowdown.

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